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Structure of a private equity or hedge fund, which shows the carried interest and management fee received by the fund's investment managers. The general partner is the financial entity used to control and manage the fund, while the limited partners are the individual investors who receive their return as capital interest.
Instead of a Form 1099, MLP investors receive a Schedule K-1 tax form. As a consequence of their pass-through status, holding MLPs in tax-exempt accounts may generate Unrelated Business Income Tax (UBIT). [2] To encourage tax-exempt investors, some MLPs set up C corporation holding companies of limited partner which can issue common equity. [3]
Summary Unrelated Business Taxable Income (UBTI) is the income that can trigger Unrelated Business Income Tax (UBIT) for tax-exempt organizations and retirement accounts. Investors can own MLPs ...
Similar to direct MLP investment, return of capital distributions from an MLP fund structured as a corporation lower an investor’s basis, and taxes are not [...] Beyond the K-1: Tax Treatment ...
Here’s how a master limited partnership works, examples of MLPs and their pros and cons.
Unrelated Business Income Tax (UBIT) in the U.S. Internal Revenue Code is the tax on unrelated business income, which comes from an activity engaged in by a tax-exempt 26 U.S.C. 501 organization that is not related to the tax-exempt purpose of that organization.
Typically, 70-100% of MLP distributions have been considered a tax-deferred return of capital, which means one does not pay taxes on that portion of the distribution until the investor sells his ...
Revised IRS tax treatment of MLPs made the structure inefficient and infeasible, in light of the special tax that is levied on MLP owners who hold them in tax-deferred or exempt accounts such as 401(k)s, IRAs, and Roth IRAs. A more recent alternative called income depositary shares (IDS) has also failed to attract investor attention due to the ...